What are greenhouse gasses and how do they affect the Arctic?

Greenhouse gases (GHG) are gases that trap heat energy in the Earth’s atmosphere, causing temperatures to increase—also known as global warming.  Some of the most common greenhouse gases are carbon dioxide, methane, and nitrous oxide: gases that have always been in the Earth’s atmosphere.  To keep GHG from disrupting the global temperature, the Arctic plays a key role.  According to the National Snow and Ice Data Centre, the Arctic acts as a refrigerator for the Earth by reflecting sunlight back into space.  This, in return, balances the global climate.  However, since the industrial revolution and the rise in human population, GHG have increased tremendously.  Human activity has caused the global temperature to increase by about 1 degree Celsius according to NASA.  This may not seem like much, but an increment of just 1 degree can cause oceans to warm up, leading to the ice in cold places, like the Arctic, to melt at a quicker rate.  Additionally, water absorbs heat, so when ice melts, most of the sunlight gets absorbed by the ocean which creates more heat resulting in more ice to melt.

Arctic Reflections

Climate changes in the Arctic are not only a concern for humans but also for animals, and the only ones who can solve this growing problem are us.  Many companies are incorporating greener practices, but this is not enough due to the damage that has already been done.  Having said that, there is still a chance of saving the Arctic.

Arctic Reflections, a start-up company based in the Netherlands is on a mission to restore the Arctic ice.  According to the brains behind the start-up, their plan is to target specific locations during winter around the Arctic Ocean and pump water onto existing ice sheets.  The freshly pumped water will freeze quickly due to the cold climate, creating thicker ice sheets.  Once the ice forms, the ice would be transported through existing ocean currents into the Arctic.  This concept will help reduce the effect of the amount of ice melting in the summer, and hopefully save the Arctic.

Early this year, Arctic Reflections took their first field trip to the Arctic.  There, they managed to pump out enough water to thicken the ice by 25-30cm over 4000m² of surface.  The team of scientists also tested the concept in Svalbard, using tools to measure the temperature of the ice over the coming months to prove their theory that the thickened ice will not completely melt during the summer.

Arctic Reflections is working hard to save our Earth, and we could do the same.  If we all incorporate more environmentally friendly practices into our daily life, we might be able to save the Arctic, and us.

What is ESG investing?

Environmental, Social, and Governance (ESG) is a metric used to assess how sustainable a company is.  According to Conservice ESG, the environmental criteria can be evaluated through measuring a company’s carbon or toxic emissions, water usage, and waste of different types of resources.  Social criteria can include subjects like labor management, worker safety training, and supply chain labor standards.  Governance criteria can include business ethics, accounting principles, and executive compensation.

If you’re feeling overwhelmed by this, don’t worry.  You don’t have to evaluate all this by yourself.  There are simpler ways to assess ESG-friendly companies offered by various platforms.  According to one option, Simply Sustainable, “companies are evaluated based on publicly available information such as media sources and annual reports, with scores given for each material ‘E’, ‘S’, and ‘G’ topic, alongside an overall score.” These scores help investors decide if they should put their money into a particular company.  ESG scores can be found from different platforms like Bloomberg ESG, MSCI ESG, and Yahoo Finance.  You can also read ESG reports released by companies to perceive what ethical practices they have been implementing.  However, before jumping into research, you should probably learn how to read ESG scores.  ESG scores are assessed on a scale of 0 to 100, where a score above 50 indicates the company is performing better ethical practices than others.  In short, the higher the score the more sustainable a company is.

As students, doing research on a single company one at a time can be time consuming.  If you’re goal is to invest in a bunch of ethical options with minimum research, then ESG funds are what you’re looking for.  Most funds are a basket full of various types of assets put into a single investment option.  They can be a great initial investment, because they help diversify the portfolio and overall risk.  However, remember to do some research before making any decisions.

Pros and Cons of ESG

ESG investing has been around since 1960s, yet it started to gain more importance after COVID-19.  An increasing number of investors are moving toward ethical investing, which is a good thing, but it’s also important to know the pros and cons of ESG investing.  According to Design My Report, a few positives of ESG investing are that it can give high returns, have a positive impact, have reduced risk, and improve corporate behaviour.  ESG investing can give higher returns in the long-term, it argues, because companies that stick to sustainable values are more likely to mitigate risk.  On the other hand, if you were to invest in a company that is unethical, you would be exposed to more risks.  Also, if more people take part in ESG investing, this can encourage companies to practice improved corporate behaviour.  A few negatives listed by Design My Report are limited investment opportunities, a potential for lower returns, and a lack of standardization.  If you’re looking to diversify your portfolio but only want to invest in ESG-friendly companies then you might have limited options, as many industries rely on unethical practices to keep their business going.  Plus, if you’re looking to invest in “small cap” companies, companies that have smaller capitalization so not a lot of money invested in them,  then they might not have the proper requirements to be considered for the ESG criteria.  Moreover, some investors believe that ESG investing is not profitable, because they believe companies would have to spend more money to implement ethical practices.  This would affect the company’s net income, generating lower returns for investors.  Additionally, ESG is not standardized, which means that ESG scores can vary from one investing tool to another.  This can be a problem for ethical investors, especially if you’re thinking of investing in ESG funds, because you may not be aware if an unethical company is put into the ESG criteria.

Generically, in the times we’re living now, creating sustainable practices based on your values can be very beneficial for yourself and the environment.  That said, you can implement these practices in your daily life and by ethically investing, because what matters the most in the end is reaching your goals, one way or the other.

Even if you earn minimum wage, you can still invest.  Investing isn’t something that requires a large amount of cash up front.  According to Scotiabank, if an investor were to contribute $200 monthly for 15 years with a rate of return of 5%, they would end up with $53,181 when it matures.  This is just an example, but it shows that you don’t have to be rich to invest.

First, it’s probably a good idea to open the right types of accounts as a student.  There are two main types of accounts: chequing and savings.  Chequing accounts are used for frequent transactions such as daily expenses, monthly bills, and are usually where most people deposit their paychecks.  Savings accounts usually offer an interest rate, which is the rate at which you earn interest on the amount in your account.

Most banks in Canada offer student chequing accounts that come with many benefits.  For example, TD’s student chequing account offers a $0 monthly fee, unlimited transactions, no transfer fee, and no monthly fees for overdraft protection.  This is a good first step because a student chequing account will eliminate monthly fees that exist in normal chequing accounts.

The next account most students open is a savings account.  TD says that a savings account “can help you achieve short, medium and long-term goals like a vacation, school expenses or an emergency fund.” Most banks offer different types of savings accounts with different interest rates or minimum deposits.  Choose the one that aligns with your financial goals.  You can also ask a professional at your bank to provide you with more information.

To invest, you’ll have to first make an appointment with your bank to open a special investing account.  As stated by Scotiabank, there are many types of investing accounts, but most students prefer opening a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP).  There is one main difference between a TFSA and an RRSP.  In an RRSP you can get a tax reduction on your taxable income as you contribute, but you get taxed when you withdraw your money.  In a TFSA you don’t get the benefit of a tax reduction, but you don’t get taxed when you withdraw your money.  Both accounts have their pros and cons, but your financial advisor can provide you with more information to best suit your needs.

Once you have all your accounts open, ask yourself the following questions: What are your financial goals? Do you want to invest for a long-term or short-term? What is your risk tolerance? These are all important questions to think over to reduce confusion when choosing an investing option.

First, let’s talk about low-risk investments.  There are a few low risk investing options such as, Guaranteed Investment Certificates (GICs), term deposits, and Bonds.  According to Government of Canada, “Guaranteed Investment Certificates (GICs) and term deposits are secured investments.  This means that you get back the amount you invest at the end of your term.” Bonds are also a safe investment.  As explained by Vanguard, “by buying a bond, you’re giving the issuer a loan, and they agree to pay you back the face value of the loan on a specific date, and to pay you periodic interest payments along the way.”

On the other hand, if you’re up for some risk you can buy individual stocks of companies.  Stocks can give good return but there is always a risk that if the company does not perform well, you could lose money.  There are also mutual funds and Exchange Traded Funds (ETFs) which are a bunch of stocks and bonds put into a single fund to help diversify risk.

Overall, investing can be a little confusing at the beginning, but there are a variety of options available depending on your goals.  The earlier you start saving and investing your money, the more return you’ll get in the long run.  If you’re interested in learning more about investing, you can register in FNCE 249 at Athabasca University.